Rising lumber costs explode the tab on new home construction, DIY projects in Colorado – Greeley Tribune

Like many other families affected by the effects of the pandemic, Deborah Cowles saw this as a great opportunity to improve the look of some things in her centenary home.

But the timing of the desire to replace an aging cedar fence just wasn’t right, so Cowles decided to postpone it for a few months until things would work more smoothly.

Smoothly maybe. Cheap, no.

“I kept the companies’ offerings for a year, and when I got back to it, the same project, the same company, was more than $ 1,000 more expensive,” said Cowles. “Another company was $ 2,000 more.”

What was worse for Cowles was a contractor’s inability to guarantee the wood they wanted. The companies offered what they had, which wasn’t much.

“It was amazing,” said Cowles. “There was a run on wood.”

Market experts say the cost of wood – measured in 1,000-foot increments – has tripled or more since last year, an unprecedented demand fueled by the low inventory levels caused by the pandemic and a dire view of any improvement.

Wood stacks will be stored at an Adams Lumber Company warehouse in Centennial on Tuesday, May 4, 2021.

“When the pandemic restrictions got under way in April and May last year, the sawmills saw what was happening when entire sectors of the economy stalled and they assumed the worst looking back on the 2005-2009 crisis,” said Dustin Jalbert, a softwood economist with Fastmarkets, an international commodity price reporter with offices in Massachusetts.

The factories “cut and cut production sharply, employees on leave, and the expected slowdown in demand never occurred,” he said. “We all expected that the cost of new homes and renovation project costs would decrease with higher contractor prices. But we just haven’t seen it in the market and it’s non-stop. “

With one of the hottest real estate markets in the country fueled even harder by historically low interest rates, Colorado has been at the forefront of a price boom that shows no retreat.

“The home builders planned production accordingly, and then COVID-19 hit,” said Ali Wolf, an economist at Zonda, a housing market research company. “At first the housing market slowed, but then something interesting happened: the combination of lockdowns and more time at home made people realize that they wanted to live in a home that met their evolving needs.”

According to Zonda’s New Home Pending Sales Index, new home sales in December 2020 were already 43% above the same period of the previous year.

As a result, 86% of builders report major supply disruptions, as shown by Zonda data, with 96% of them reporting price increases in March and April, with timber costs being the most critical component.

“Wood prices have risen by 250% compared to the previous year,” said Wolf, “which makes building a new house considerably more expensive and drives up prices for consumers.”

Some estimates, including those from the National Association of Home Builders, put the additional cost of a newly built home at almost $ 36,000 – and the trend is rising.

“Housing construction was already in full swing, and there were more rental apartments and because people began to hate their place of residence after seeing it around the clock,” said economist Elliot Eisenberg. “And now, in addition to all the building and remodeling, these outdoor huts are also being built in a socially distant manner and the demand for wood is increasing.”

Construction on The Canyons Housing Estate in Castle Pines will continue on Tuesday. September 1, 2020.

The interest rate on a 30-year mortgage averages 3.04%, a decrease of nearly 84% from the 1980s, Eisenberg noted.

“Conversely, the price of a thousand plank meters of wood peaked at $ 1,300 today, compared to around $ 328 a year ago,” he said. “In 2009 it was only $ 163. Nothing is forever. And I don’t think we’ll see a reversal. “

Although prices continue to rise, demand continues despite other expectations.

“Housing costs are influenced by several factors that are often beyond the control of the builder: land availability, labor shortages, and the prices of lumber and other materials,” said Ted Leighty, CEO of the Colorado Association of Home Builders. “When any of these costs rise, it becomes more difficult to provide enough affordable housing to meet our state’s demand … and in turn, drive hundreds of homebuyers out of the market.”

Leighty said there was a press for lawmakers to help. In March, more than three dozen associations and trade groups wrote to US Secretary of Commerce Gina Raimondo to “investigate the timber supply chain … and seek immediate remedial action that will increase production,” a copy of the letter reads.

“Given the better than expected demand for housing and the unprecedented activity of the home improvement segment, builders see a lack of wood that leads to ever-increasing delivery delays,” the letter said. “The growth and economic potential for living and building is limited as long as construction timber remains expensive and scarce.”

Much of the supply problem is not uniform across the country. The number of trees in the American South is okay. It is the beetle and wildfire ravaged forests of the Pacific Northwest, along with a burden on the Canadian sector from high US tariffs on their products, that is knocking down the supply chain.

An Oregon Fire Brigade ...An Oregon Air National Guard fire team is working to excavate hotspots on the fire lines of the Holiday Farm Fire east of Springfield, Oregon, Monday, September 21, 2020.

“By perhaps the turn of the year, people began to realize that the construction industry wasn’t going like the global financial crisis and it was recovering much faster than expected,” said Peter Knowles, executive vice president, Rider Levett Bucknall. a worldwide construction cost consultancy. “Suppliers and producers will not be returning to this normal production anytime soon, and as the economy recovers, more projects will come on the market.”

The final, Knowles said, is unlikely to show up for at least this year’s record, maybe even longer.

The economist Jalbert thinks the same, although “positive demand and negative supply shock” persist.

“The looming specter of the past housing crisis, so many of the sawmills closed and that makes everyone pause, warn against investment,” he said in order to build new facilities to meet demand. “The demand side has to cool down, mortgage rates have to rise and some homebuyers are forced out of the market. The insane prices we’re seeing will resolve, but will likely not return to the pre-pandemic historical average. “

For the past 35 years, the Adams Lumber Company in Centennial has served many local builders and a slew of home improvement, said owner Mark Adams.

But the rise in wood prices is beyond his experience.

“It amazes me that not long ago we paid $ 15,000 for that load for half a piece of wood, and now it’s about $ 55,000,” he said. “You swallow hard.”

What he also sees is an insane rush of inventory fueled by bottlenecks across the metropolitan area. Biggest flaw: cedar fences like those of the Cowles type you can buy in Centennial.

Jared Feltman is bundling wood on the forklift at the Adams Lumber Company in Centennial on Tuesday, May 4, 2021.

“We get calls from fence builders we’ve never heard of before asking what we have and how much and how they buy everything without asking a price,” said Adams. “We try to be very protective of our local customer base to make sure we don’t sell them short. But even now it is difficult to find the inventory at all on some days. Often it is simply not available. “

That puts an even bigger press on local builders who have enough to supply to meet their needs while others don’t.

Anecdotally, the Colorado Association of Home Builders and Adams Lumber say they heard of on-site theft of supplies – especially wood – has increased several times.

“It’s all they can do to keep the stuff,” said Adams, noting that he has even seen an increase in efforts to acquire products through phone fraud.

For Cowles, it just means pausing to see if the new fence is really a home improvement project that she wants to tackle.

“We were really surprised,” she said. “The main reason to wait could be that they aren’t getting the quality of the wood we really want, and the substitute wood they offer really has no history in Colorado so we don’t know how it’s going to last.”

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